Payment systems are moving to real-time around the globe, according to a the fifth annual “Flavors of Fast” report from FIS, the financial technology powerhouse. The annual report was begun by Clear2Pay, which FIS acquired in 2014.

FIS found 40 active real-time payment programs around the world, up from 25 in 2017 and nearly three times as many as the company’s inaugural 2014 study. In addition it identified five payments programs under development, plus another 16 expected to be live in the next 12-18 months.

Federal Reserve Bank of Chicago. The Fed has asked for comments on what its role should be in faster payments.

The report rated the faster payments systems around the world, rating India 5, the highest rating, Australia 4+ and Singapore 4+. Somewhat improbably, the United States got a 4 rating even though its system isn’t operational at scale. It launched some small segments at the end of last year but lags well behind other countries, including the UK which celebrated the 10th anniversary of its faster payments system this year.

“We rated the countries at a point in time,” explained Elena Whisler, head of global product management, open payments at FIS, “meaning that we rated the country as is regardless if they were just launched. The main reasons US is currently a 4 is because it hasn’t got ubiquity yet,” she added in a bit of understatement.

“Now banks have the question, when something isn’t mandated and doesn’t go through a compliance budget cycle, banks need a business case, which is difficult to do with real-time payments. It’s difficult to have a business case when we don’t know where value will come from.”

“Views are being sought on two potential actions that may support the further development of faster payments in the United States while increasing the resiliency and security of services offered to the public: 1) the development of a service for real-time interbank settlement of faster payments 24 hours a day, seven days a week, 365 days a year (24x7x365); and 2) the creation of a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments, regardless of whether those services are provided by the private sector or the Federal Reserve Banks.”

This being the Fed, the announcement came with a caveat:

“The Board is not committing to any specific action and is seeking input on which, if any, actions the Federal Reserve should take.” Comments are due by December 14, 2018.

Whisler, who attended the Chicago meeting, said “It will be interesting to see how the industry responds to this RFC (Request For Comment), knowing that the TCH (The Clearing House) has already launched their RTP (Real-Time Payments) network, not just from responding to the RFC itself but the next steps in executing a faster payments strategy.”

The U.S. is in a quandary, she said before the Chicago meeting. Bankers and regulators knows the country needs to get to real-time payments, and banks know it will move toward that, but just how quickly, how ubiquitous — those are still questions.

In communications the world has moved to real-time, Whisler added. You can do things with text messages, such as paying and donating, that people didn’t even think of 10 years ago. Other parts of the world are seeing innovation in payments. In APAC, and China in particular, retailers and taxi cabs are using QR codes for real time payments with customers using their mobiles to scan the QR code — no chip cards or terminals needed.

“In Europe we are starting to see trends around disintermediating POS terminals. The use of credit cards isn’t as prevalent in Europe where retailers are using the SEPA instant payment scheme. I think we could see some of those use cases being brought into the U.S., especially in niche markets that don’t need all consumers to check out in the same way. It would be interesting to see a large retailer like Walmart use QR codes.”

FIS defines real-time payments as “inter-bank fully electronic payment systems in which irrevocable funds are transferred from one bank account to another, and where confirmation back to the originator and receiver of the payment is available in one minute or less.”

The fintech company has several real-time payment functions for its participating banks and members of the COOP credit union network and for P2P payments. It offers deployments that could let banks got to real-time payments in months for smaller financial institutions, she said.

“We also have an offering to work with large financial institutions. At smaller banks we struggle because there are so many different levels of understanding in the U.S. of what real-time payments are. What does the bank need to connect to, what is the difference between Zelle and TCH? Industry education has become real important. I would say a significant portion know the words real-time payment but they don’t know what that means for their financial institution. It is not only about what products each vendor offers but how to educate a bank so they know what to do with changes within their bank. We haven’t introduced a new payment method since the 70s.”

FIS says that the value of faster payments will come through services that ride on top of the payments.

“Faster payments are no longer a differentiator,” according to the report, which seems to overlook the lack of widespread faster payments in the U.S. “The real determinant of innovation lies in what can be done on the rails once they’re built.”

The FIS report concluded that overlay services – chat, retail apps, instant loans and more – and open APIs (Application Program Interfaces) provide innovations that encourage consumers and businesses to use real-time payments.

Banks use APIs to deliver services from third parties and sometimes to simulate real-time transaction with legacy mainframe systems that process in batch.

Legacy systems that have built up over time, and may have come from two or more firms through years of mergers and acquisitions, are sometimes described a running code that looks like spaghetti.

Will APIs make it worse?

“APIs can add spaghetti if not used strategically,” said Whisler. “Sometimes organizations use APIs to hide and create a real-time experience without migrating the back office, and that can add a layer of indirection,” she said. “We have also seen it done right, used as a platform along with an API gateway to centralize how APIs are exposed and processed.”

I like the pace of technology, especially in finance where it can move so fast. I'm on Jay Palter's list of fintech influencers to follow in 2018, although it takes a bit of scrolling: http://jaypalter.ca/2018/01/2018-fintech-influencers. In addition to Forbes I write for t...